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Gender Pay Reporting – the clock is ticking

The Government has now published a revised version of the draft Equality Act 2010 (Gender Pay Gap Information) Regulations regarding the obligation on large employers (those with 250 or more employees) to report on gender pay gap data.

What happens now?

The Regulations will now be placed before Parliament and may be subject to further tweaks before being finalised. Once approved by Parliament, the Government will also publish supporting non-statutory guidance for employers to flesh out what will be required.

The intention is for the Regulations to come into force on 6 April 2017.

What do the Regulations say?

Below is a summary of the main differences between the initial draft of the Regulations and the revised draft the Government has now published.

Many of the changes are to address concerns or queries raised during the consultation on the original draft:

  • Snapshot Date – Originally the intention was for employers to gather data by reference to an annual snapshot date of 30 April. This has been changed to 5 April each year and the first snapshot date will be 5 April 2017. The change to the snapshot date will have a knock-on effect on the reporting date so employers will be required to report within 12 months of 5 April i.e. by 4 April each year meaning that the first reporting date will now be on or before 4 April 2018.
  • Definition of Relevant Employee – this has been clarified to mean a person who is employed by the employer on the relevant snapshot date. This will cover employees, those working under a contract of apprenticeship and workers.
  • Full-pay relevant employees – When calculating the mean and median gender pay gaps and pay quartiles, employers are now required to base calculations only on full-pay relevant employees. This means that any employees who, during the relevant pay period, are on leave (annual leave, maternity, paternity, adoption, parental or shared parental leave, sick leave and special leave) can be excluded from the calculations. This change helps to address concerns about the data being skewed due to maternity leave periods being relevant and therefore making the gender pay gap appear wider than it actually is.
  • Gender bonus gap – The revised version requires the overall bonus gap to be reported as a mean and median (rather than just mean) to provide transparency regarding the distribution of bonuses within the organisation.
  • New definition of pay – A number of points of clarification have been included in the revised Regulations. Pay includes basic pay, shift premiums, paid leave, piecework and allowances. A non-exhaustive list of allowances which should be included is set out, including car allowances and location allowances. Termination payments (including redundancy payments) and payments in lieu of leave are excluded.
  • New definition of bonus – Bonus pay means any remuneration that is in the form of money, vouchers, securities, securities options or interests in securities and relates to profit sharing, productivity, performance, incentive or commission. Remuneration in the form of securities, securities options and interests in securities are treated as paid to the employee at the time they are charged to tax (or would be charged to tax but for a relevant exemption or relief). To address concerns about misleading information due to many bonus payments being made in a single pay period, the Government has provided that only the part of the bonus payment that is proportionate to the relevant pay period should be included in the calculation of hourly rate of pay (see further below).
  • Hourly rate of pay – The revised Regulations provide clear rules on how to calculate the employee’s hourly rate of pay as this was not clear in the initial draft. Where an employee has normal working hours each week then the hours of work will be those specified in the contract of employment. Where an employee has no normal working hours, or the number of hours differs each week, then the hours of work will be calculated as an average over a 12-week period ending with the last complete week of the relevant pay period.
  • Pay quartiles – The method of devising pay quartiles has been clarified and requires the report to set out the relative proportions of males and females in each pay quartile band. The new definition also makes it clear that each quartile should contain the same number of employees. Employers must take the highest and lowest hourly pay rates and divide these into four equal quartiles then calculate the percentage of males and females who occupy each quartile.

What happens if I ignore the Regulations?

Failure to comply with the Regulations will constitute an unlawful act under the Equality Act 2010 which empowers the Equality and Human Rights Commission to take enforcement action. This is contained in the explanatory notes to the revised Regulations.

Once Parliament has approved the Regulations and the non-statutory guidance has been published, further guidance will be provided.

How can Ward Hadaway help?

We can help in two ways:

Firstly, we can carry out an analysis of your company’s pay information and produce a report in a format suitable for publication.

Secondly, we can analyse your pay structures to provide a confidential report on any concerns or potential areas of equal pay discrimination.

If you haven’t already taken any steps to get ready for gender pay gap reporting, now is the time to act, while you still have time to rectify any issues before April 2017.

If you require any further information, please do not hesitate to get in touch with Rachael McCartney or Lynn Scope.